BlockBeats reported on Sept. 10 that QCP, in a macro thematic report dated Sept. 10, said the Japanese yen recently climbed from around 160 to around 154. The move was mainly driven by Bank of Japan policy normalization, carry trade unwinds and a weaker U.S. dollar.
The report said Japan’s foreign exchange reserves fell by $87.8 billion in August, while securities holdings also declined by $87.8 billion. QCP said this may be related to funding arrangements for yen intervention, and warned that markets should stay alert to the risk of further intervention.
Energy remains central to the U.S. inflation picture
On inflation, QCP said the jump in PCE inflation this spring was largely driven by energy prices. From February to May, non-durable goods contributed about 0.85 percentage points to the year-over-year increase in core PCE, while energy alone contributed about 0.89 percentage points. As of July, energy’s contribution had eased to 0.48 percentage points.
Even so, core PCE remained at 3.3%, suggesting that lower energy prices have not fully eased the Federal Reserve’s concern about broader inflation pressures.
Labor market resilience is still intact
QCP said the U.S. labor market continues to show resilience. Nonfarm payrolls increased by 162,000 in August, well above market expectations. At the same time, payroll data for June and July were revised down by a combined 55,000. Over the past three months, average job growth came in at about 71,000.
QCP said the labor market has not shown a clear loss of momentum, leaving support in place for the “soft landing” trade, though household financing costs remain high.
Hormuz shipping limits and low SPR add to supply risk
At the same time, shipping through the Strait of Hormuz has been constrained, while the U.S. Strategic Petroleum Reserve, or SPR, stands at only about 286.6 million barrels, a historically low level. QCP said this means inflation risk from an energy supply shock remains difficult to dismiss. Brent crude has recently moved back above $100 a barrel.
QCP framed the key question this way: if employment remains resilient and inflation is being driven mainly by energy, can the Federal Reserve still stay on hold through the rest of the year? If core inflation remains sticky, expectations for tighter policy could heat up again.